In other cases, the vendor agrees to buy back unsold merchandise from the retailer — this is a common arrangement for higher-value seasonal clothing, like designer coats.
The distributor sells large quantities of clothing stocks to a reseller, who tries to charge sufficient mark-ups to cover his costs and still make a profit.
Retailers hedge risk by seeking vendor financing or vendor buy-back arrangements as mentioned above, which distributes some of the risk of unsold merchandise back up the supply chain to the producer or wholesaler; they also open alternate channels such as outlet stores to liquidate unsold merchandise while freeing up floor space for new arrivals.
A drop-shipper relies on a third party, like an online fashion blog to generate consumer interest and initiate an electronic order that is sent to the drop shipper's warehouse for fulfillment.
This allows consumers to realize prices closer to the wholesale level, but it disadvantages retailers who lose control over many aspects of customer service, discounting, packaging etc.